Search

Canadian economy suffers from U.S. turmoil, but no recession

TORONTO, Oct. 15 /CNW Telbec/ - The turmoil in the United States is
limiting Canadian economic growth to 0.8 per cent in 2008, but Canada will
avoid a recession, according to the Conference Board's Canadian-Outlook-Autumn
2008, released today at the Conference Board's Business Outlook briefing in
Toronto.
"To understand Canada's outlook, we need to separate the extraordinary
current financial turmoil from the impact on the real economy," said Glen
Hodgson, Senior Vice-President and Chief Economist.
"Living beside a troubled neighbour is taking its toll. Massive declines
in the trade sector have shredded Canada's economic growth, and raw material
prices have fallen off their peak levels. Still, the domestic economy has
enough momentum to keep Canada out of a recession."
For 2008, domestic demand remains a pillar of economic growth. The income
effect from resource prices still carries plenty of momentum-as reflected by
the strength in real after-tax income and corporate profits over the first
half of this year.
However, the U.S. housing crash and ensuing financial market crisis is
affecting investor and consumer confidence and tightening credit conditions on
a global scale. Slower economic growth in industrial and developing economies
is taking the shine off commodity prices, which will weaken the real income
gains that have sustained the domestic economy.
Real net exports are expected to fall by $34 billion in 2008, an amount
equivalent to 2.5 per cent of real GDP. In line with a steep drop-off in U.S.
vehicle sales, Canadian auto exports are forecast to fall by 19 per cent this
year-with Ontario bearing the brunt of the losses.
Signs of malaise are creeping into the outlook. While the manufacturing
sector continues to bleed jobs steadily, other sectors have also seen an
erosion in the growth of jobs in recent months.